Monthly Archives: November 2018

Market Angst! Vendors are trying to get more money out of a mature market

By Michael Feit | Feit Consulting , Pricing , Vendors

This article appeared in Legaltech News.

By Michael Feit
mike@feitconsulting.com

Sometimes, there’s not much that can help the medicine go down, and when there’s not, it becomes clear the rather repugnant taste of it (the medicine). This is a metaphor for the now center-stage discussion taking place regarding the pricing practices of LexisNexis and the cease and desist letter prepared by AALL which argues that Lexis’s recent tactics breach anti-competitive covenants rendering the new sales practices illegal or at least render the tactics at odds with the AALL Guide to Fair Business Practices for Legal Publishers.

LexisNexis and Westlaw dominate the lion’s share of online research and print platforms for all law firms of all sizes; in fact, most large firms historically adopted a practice of providing both services to its attorneys. Today, less than half of larger firms retain both. Prior to the recession law firms were able to pass-through and recover >80% of their Lexis and Westlaw costs. However, since the recession, both vendors have been in defense mode. Online cost recovery has dropped to <35% and firms have been increasingly realizing retaining both vendors is unnecessary. The evaluation of the sole provider option is not just a viable option for most firms—it is a necessity.

Having discontinued the ideal world of standardized pay-as-you-go retail pricing by 2010, both have been operating in secretive pricing practices and leveraging terms that vary greatly from firm to firm—not the least of which is pricing Am Law and NYC firms disproportionately higher than the rest of the market, albeit ad hoc.

Therefore, LexisNexis recently leveraged the power of a certain suite of its products–including Lex Machina, Law 360, Wall Street Journal and American Lawyer subscriptions–to the sale of Lexis Advance; an unpopular move within the information services community, the move is a tactical effort to win sales over Westlaw abut which subsequently triggered the outcry from the information services community.

What Lexis is doing is really not that unusual in this market. In an ideal world, yes, the industry’s two dominant players–Lexis and Westlaw–would publish retail pricing, and firms could pick and choose buffet-style which products they wanted based on their practice needs and budget. Unfortunately, that ideal world does not exist, and has not existed for some time. Both Lexis and Westlaw are mature products in a saturated market trying to hold on to a revenue stream that has nowhere to go but down.

Ever since the release of WestlawNext, Westlaw has been the more popular platform. Lexis, for some time, had an inferior interface that made Westlaw the go-to vendor at many firms that continued to have both vendors. Lexis, as a result, was then easier to cut because of low usage. Even when Lexis was retained, it typically was in the context of a large price concession.

On top of this, and symptomatic of a mature market, there are now many new tools and efficiencies that are cannibalizing usage–and new tools will continue to emerge and continue to cannibalize. Lexis has invested in several analytical tools, but artificial intelligence products, savvy analytical tools are all going to erode the use of Lexis and Westlaw, unless, of course these vendors continue to purchase all the new products entering the market.

For all these reasons and more, firms are vigorously debating the viability of operating with just one platform—and for the first time since the early 90’s, retaining just one of these vendors has become the norm. Our data shows 54% of large law firms have now, in fact, opted to retain only one vendor, with about 60% choosing Westlaw.

In a tangible way, there are winners and losers. Lexis would not be able to recover 7+ years of usage lost to WestlawNext without this tie-in tactic. Tying Lexis Advance to core products, such as Lex Machina, Law360 and print has made Lexis competitive once again versus Westlaw. While doing so is not building good will, customer service and satisfaction are not the primary aim of a mature vendor—the products just need to be indispensable and, for at least some firms, it appears that some are.

Elimination of Lexis is no longer easy. Firms that have recently eliminated Lexis have found it uncomfortable to live without the peripheral products. Some have come back into the Lexis fold and others are contemplating coming back. Firms who would have eliminated Lexis are now thinking twice about that outcome.

Does this make Lexis the winner? In the short run, potentially yes—meaning, this strategy is working for Lexis to preserve its client base and revenue stream for now. However, Lexis runs a huge risk that firms who are forced to live without their other products might find that life-style relatively easy and may never return. Currently, Lexis is banking on that not being the case but only time will tell.

Goodbye Relationship, Hello Transaction?

By Michael Feit | Feit Consulting

As we prepared our 2019 Legal Information Vendor Market Survey questions, we realized a lot had changed in the market since our last Survey.

Multiple vendors had made aggressive moves to take more market share – and seemed to have left customer relationships at the side of the road.

It left us with the question, are legal information vendors operating on a new premise: “Goodbye relationship, hello transaction”?  It may not be all that surprising behavior in a saturated market with vendors, but it’s good to understand the tactics of the major players and how firms across the industry are responding.

Here are some of the questions we had on our minds as we developed the survey:

• Is sole provider morphing into churn – delete a vendor, bring the vendor back at a lower cost?
• Will Lexis be successful with its restrictive policy, and how important to firms are their peripheral products to underpin this strategy?
• How has the market sentiment regarding Bloomberg BNA changed with the sunsetting of key print and other products?
• How do customer’s feel about the forced upgrades in Bloomberg BNA proposals?
• How likely are firms to purchase Westlaw Edge? And what are they willing to pay?
• What are the 2019 must-have products?

In the end, the outcome may resemble what has transpired in other similar markets. Alternatives and new competitors will spring up. Customers will be on the alert to seek out more reasonably-priced options.  And when the pain of these price increases – and presumably, additional increases to come – becomes too great to bear, firms may simply begin to walk away.

We look forward to what the data will show.

Optimal Contracts are Core to Delivering Value

By Michael Feit | Pricing

Do you truly know whether your contract has the best terms and pricing compared to the market?  How prepared is your firm for your next contract negotiation?

The number 1 priority of legal procurement is to better analyze and reduce legal spend according to the 2018 Buying Legal Council Survey.  What this means for law firms is increasing price competition and a resultant downward pressure on price.  Internally, this means every department within a law firm is under intense scrutiny to demonstrate value in terms of any business metric that measures how well the firm delivers client service at the most cost-effective price.

For legal information professionals, core to demonstrating departmental value is optimizing provider services and contracts.  One of the biggest mistakes we see are contract renewals without application of the right leverage and industry knowledge.  The value of firms’ online research platforms does not automatically increase 3-5% annually just “because”.  To pay increases annually, it would be expected that the firm is receiving more value, content or features than the year before. Complacency or lack of diligence in managing information resources can have long-lasting unfavorable implications on both processes and costs, thereby hampering overall efficiency.

Simply consider the recent and rapid changes in the market for online research providers.  It is unlikely that firms’ contract pricing and content are aligned with current products, strategy, and shifts in the market.  Resources purchased in the past may no longer provide the necessary tools to remain competitive and cutting edge today. Legal information needs are continually in flux and should be reviewed periodically.

An optimized budget delivers the financial resources necessary to take advantage of new and exciting offerings currently emerging in the market, such as new AI and analytics tools.  Having access to these products could be significant in creating new efficiencies and enhancing productivity at your firm. Asserting yourself in confidence, understanding your choices and making them clear at the negotiation table will ensure you reach the best outcome for your firm.

However, pricing knowledge alone is not enough to optimize pricing. Strategy and negotiation tactics are critical for success. Law firm administrators must understand their leverage and be able to utilize it a meaningful and timely manner. Gaining a clearer picture of your purchasing power is essential to achieving an optimized outcome.

Feit Consulting has developed detailed strategies and the industry’s most comprehensive benchmarking, that helps information professionals achieve the leverage required for successful vendor negotiations. You can see a preview of our comprehensive Optimizing Legal Information Pricing white paper here.  Want to discuss your firm’s specific needs or have your contracts benchmarked? Contact us at info@feitconsulting.com.

How to Not be Hostage to Your Vendor

By Michael Feit | Feit Consulting

By Michael Feit

The recently deployed pricing tactic by Lexis only served to add more heat to an already vigorous debate regarding the viability successfully operating with just Lexis or just Westlaw.  For the first time since the early 1990’s, retaining just one of these vendors has become the norm with 54% of large law firms having opted to retain only one vendor–and about 60% of those choosing Westlaw.

A vital takeaway from the current debate on pricing tactics is that no firm should be hostage to their vendor.  Well-established customers are, on average, treated the worst by their providers and receive the most unfavorable terms and conditions.  New technologies, including AI-based platforms, will continue to erode the consumption-based model, and for a host of other reasons, firms should place themselves in a position of having options.

In a perfect world, Lexis and Westlaw would publish retail pricing, and firms could pick and choose which products they wanted based on their practice needs and budget.  This ideal world does not exist today, as both vendors have discontinued standardized pay-as-you-go retail pricing. Instead all they offer is secret pricing and terms that vary greatly from firm to firm.

The good news is, there are options! You don’t need to be a hostage to your vendor if you have enough time to evaluate the options. The evaluation process in itself can prove fruitful, sharing pertinent information that can be used in the negotiation process.

There are a great number of elements to examine, from contracts to content, not to mention the strong reactions of users to fundamental system changes. Lexis and Westlaw have both successfully infiltrated law firms’ cultures and infrastructures over their many years of service.

The idea of transitioning to sole provider can be daunting, however, considering the many individuals and processes that might be impacted. There are a great number of elements to examine, from contracts to content, not to mention the strong reactions of users to fundamental system changes.  Lexis and Westlaw have both successfully infiltrated law firms’ cultures and infrastructures over their many years of service.

Yet, the pay-off in taking a deep look at these factors can be exceptional.  A mid-size US law firm with favorable pricing will spend well over half a million dollars annually to retain both vendors.  There was a time not long ago when firms could pass through online legal information costs to clients, making Lexis and Westlaw essentially free.  That is no longer the norm.  We have entered into a new paradigm.

Where to start:

• Get the pricing intel to determine your pricing is favorable. Compare contracts with market intel in Feit’s white paper, Optimizing Legal Information Pricing.
• Assess the viability of the sole-provider option. Evaluate the option at your organization. Develop a business case. If needed, check out this resource, The Sole Provider Playbook.
• Execute and implement. Consider hiring a consultant to manage the process.
• Exploring the sole-provider option is a healthy step in revising your legal-information strategy and can provide insightful information for contract negotiations. If you choose to do it alone, these resources are an advantage to legal-information decision makers on what steps and considerations should be made in the process.